Industry Statistics: Looking Behind the Numbers

Ever since the Book Industry Study Group (BISG) hit upon the theme of “Making Information Pay” for its annual spring event several years ago, it has been filling the room with industry analysts and marketing and business development executives eager for new insights into the mysteries of our industry’s operation, well-being and future. The attendees are generally more interested, I think, in road signs pointing to where we’re going than in measures of where we are—more acutely aware that, in some ways, the information camera may not focus as well on today’s industry snapshots.

Useful and reliable industry information always has been hard to come by. But in the past century, we have been blessed by devoted professionals who have labored in the halls of such organizations as the Census Bureau, the Association of American Publishers (AAP), the American Booksellers Association (ABA), Association of American University Presses (AAUP), BISG, and R.R. Bowker and Knowledge Industry Publications (original publishers of BP Report and Educational Marketer, and predecessor to Simba Information) to unearth the data that define our business.

Data is expensive to come by in almost any industry composed of thousands of enterprises and channels of distribution. And for those who assemble it, the data is understandably an asset to be monetized. Nonetheless, the information comes through to the industry at large—by way of press releases and copies that are passed around, as well as bird-dogging by trade magazines such as Book Business, and reporters such as Jim Milliott at Publishers Weekly, Michael Cader at Publishers Lunch, Frank Romano––whose affiliations, including Printing Industries of American/Graphic Arts Technical Foundation, are too numerous to cite––or John Mutter at Shelf
Awareness.

Current Sources of Industry
Reporting

In addition to AAP and AAUP, business and publishing data comes from Bowker (ISBN, Books in Print and other products), Simba Information (Book Publishing Report, Educational Marketer, among others) Open Book Publishing (Subtext), and Nielsen’s BookScan and The Book Standard. These organizations provide various levels of information that publishers use for various purposes:

1. Real-time or near-time sales reports by title: BookScan’s daily bookstore title sales reports. Amazon’s hourly online best-sellers ranking. Ingram, and Baker and Taylor best-seller lists. While these reflect trade-market behavior as well as short-term fads, together they can provide a compass of where the market is for many categories, and provide guidelines for publishing and marketing decisions.

2. Sector and category reports: For example, trade, juvenile, religion, computer, e-books, audio, etc. Trade and professional groups such as AAP’s monthly reports, BISG’s annual “Trends,” AAUP, Audio Publishers Association (APA), as well as other reporting media such as Book Business’ “Market Focus” section and Simba. These can provide a more strategic outlook on market direction. Short-term best-sellers (“Goosebumps,” “Harry Potter,” “Da Vinci Code”) in the trade market, birth rates and adoption cycles in the school market, and technology or financial breakthroughs in the professional and business markets can distort categories in given years, so an informed eye is needed.

3. Business performance and outlook reports: Probably the most jealously guarded and hardest to come by is business performance by company and group. Publishing and media information companies such as Simba and Open Book Publishing are primary sources. Aside from applications to publishing and marketing strategies, they also guide long-range investment decisions, and merger and acquisition activity. There are, of course, scores of market research firms that publishers can commission to search their continuing databases or do targeted research for business planning. Also, the required annual filings of public companies are available to anyone who wants them.

4. Industry trends and performance: The primary industrywide sales reports are provided by BISG and AAP. R.R. Bowker, as the official ISBN registration agency, also reports annually on book-title output. Category reports are published by the AAUP and APA. Other trade groups such as the Association for Christian Retail (CBA) and International Digital Publishing Forum (IDPF) provide niche reporting.

Industry Trends Impact
Publishers of All Sizes

Michael Healy, BISG executive director, says, “[BISG’s] ‘Trends’ reports are used principally in a strategic way by corporate planners concerned with what trends are taking place within the industry. They are also used by many investors inside and outside of the industry interested in its general directions.”

Some may think that the bulk of the 12,000 or so mid-range to smaller publishers in the United States who do between $50,000 and $1 million in sales annually are better off paying attention to their marketing niche. For them, overall industry trends are in the category of climate change—a cosmic phenomenon that one has to live with, but what many perceive as being something you can do little about. But in fact, those cosmic trends can come home to roost in the smallest nest.

Confidence in the health and direction of the publishing industry is also important to smaller publishers who depend on lines of credit, who are seeking to expand or sell their businesses, and startups raising investment capital. Anyone who has brought a business plan to their branch banker will know how useful it is to anchor the prospects for their business in the stability and maturity of the industry as a whole.

Same Industry, Different Data

The interesting and sometimes confusing aspect of industry data is that BISG and AAP reports often arrive at different outcomes. For example, for 2006, compared to 2005, AAP reported a 0.3-
percent drop in revenues to $24.2 billion in industry sales, while BISG reported a 4.1-percent increase to $38.1 billion.

Tina Jordan, AAP vice president, points out that AAP uses different databases and economic models to serve different purposes. “AAP’s data is compiled based on facts gathered from the major book publishing media stakeholders via AAP’s monthly data-
collection industry service—the only statistical information servicing the book industry with factual data representing more than 80 participating publishers on a month-to-month frequency,” says Jordan. “To the greatest extent possible, the AAP uses no econometric modeling to develop its industry statistics. The raw data we receive directly from the major publishing industry stakeholders, and on a monthly basis––complemented by Census Bureau data––reaffirms the strength and accuracy in the data reported.”

To the extent that this raw data reflects a broad profile of marketplace behavior, it can be a valuable measure of month-to-month changes and sector volatility within each year, as well as year over year.

“The benefits of having two reports allows the industry to analyze data based on how the user may want to analyze the data, based on the individual methodologies,” says Jordan. “… Over the past year, we have also worked with organizations such as the Evangelical Christian Publishers Association to capture complementary data in the religious category, and the International Digital Publishing Forum in the e-book category. And we are in preliminary discussions with the Audio Publishers Association to see how we may be able to pool our resources.”

Updating Data-Gathering

Methods

For BISG, “Trends” is a major data-
gathering and interpretive program, and is BISG’s most costly program. It utilizes data gathered by Robert M. Wharton and Albert Greco at Fordham University from numerous sources such as trade associations, quarterly reports of major publishers, Wall Street financial analysts, U.S. government and private statistical agencies, national and international non-governmental organizations, and financial institutions. These are then folded into a complex forecasting model explained in detail in the report.

A major breakthrough in bringing industry reporting in line with reality came two years ago when, as a consequence of a decade of advocacy by PMA, The Independent Book Publishers Association, BISG expanded its database to include sales data from an estimated 63,000 publishing companies with annual revenues less than $50 million. The result: BISG’s “Under the Radar: A Breakthrough, In-Depth Study of the Book Industry’s Underreported Segments and Channels” showed that those publishers with annual revenues of less than $50 million generate aggregate sales of $14.2 billion. The report also found that a subset of that population—the 3,600 or so publishers with annual revenues of $1 million to $49.9 million—generates $11.5 billion of that amount.

According to BISG, by comparison, the “older, more visible segment of the industry measured by conventional tracking systems generates annual revenues of $23.7 billion to $28.5 billion, depending on the source of the estimate.”

The new research made a significant impact on the industry’s overall reported sales. Says Healy, “The decision to fold into ‘Trends’ the ‘Under the Radar’ data was in some quarters an overdue and popular measure as a true reflection of the market. There are also some who felt that it was overstated. It seems to me, though, that our industry is very diverse, and much of the growth is being generated by the smaller publishers.”

Getting Inside the Reporting

Details

In his introduction to “Trends 2007,” Healy observed that because of their narrow reporting bases, both the Census Bureau and AAP “underrepresent [the] important segment comprising smaller publishers,” and to a considerable extent “ignore books sold by the publishing arms of companies in other industries, institutions of various sorts, and not-for-profit organizations and associations.”

There are numerous loose ends in the various reporting systems that make different organizations’ figures difficult to compare. For example, AAP data absorbs standardized test data in the college and elementary-high school (el-hi) markets in the overall sales reporting of educational publishers. BISG breaks out this $2 billion segment.

Neither AAP nor BISG report on subsidiary rights revenue—an increasingly important increment of sales in the industry—although Jordan says AAP is exploring it.

AAP reports $54.4 million in e-book sales for 2006, while BISG does not yet report e-book sales. Neither AAP nor BISG are certain whether subscription revenues for electronic publishing in the reference and professional segments—a significant income producer in the library market—are completely represented in either report.

Jordan notes that audio book sales are separately reported in AAP monthly and annual data. According to those reports, book publishers’ audio sales for 2005 were $206.3 million. For the entire audio book industry, the APA reports $871 million for 2005.

However, audio books are not reported in the “Trends” report. Healy may be forecasting possible enhancements to the BISG reports when he confirms that anyone interested in projecting the industry’s economic health has to consider the digital medium—not just e-books, but downloadable audio and CDs.

And, of course, neither AAP’s nor BISG’s report shows whether growth is taking place among larger or smaller publishers, or both. For example, Subtext reports that sales of the 12 largest trade publishers grew from $8.4 billion in 2005 to $8.6 billion in 2006. It would be useful to know whether these figures fairly represent the large-
publisher market share (roughly 59 percent to 60 percent) of the database used in BISG’s “Trends,” which reported sales growth during the same period for the total trade sector of from $14 billion to $14.5 billion—which we would know if BISG also provided breakdowns by size of publisher.

Dealing With Industry

Transformation

In addition to these organizations making ongoing changes to improve data quality, the rapidly transforming nature of the book industry has not, of course, gone unnoticed. Especially for BISG, its broad franchise cries out for a more expressive definition of the enterprises, product lines and distribution channels that define the industry.

It is interesting to observe, incidentally, how trade organizations have been coping with transformative challenges over the years.

The Publishers Marketing Association (PMA) is no more. It is now PMA, The Independent Book Publishers Association. The Christian Booksellers Association (CBA) has morphed into CBA, The Association for Christian Retail. Open eBook Forum (OeBF) has made a clean break to the International Digital Publishing Forum (IDPF), and the Small Press Center in Manhattan is now the New York Center for Independent Publishing (NYCIP).

Well, it may not be time for a name change, but BISG is aware that it needs to evaluate how it defines its boundaries. Healy says, “Even before ‘Book Industry Trends 2007’ came out, the BISG Board decided it was time to do a full strategic review of the program. For example, we need to take a look at reporting nontraditional media. And we are now planning for modifications in the 2008 report,” he says, and a formal announcement regarding any changes will be made later this year.

It seems to me that our present trends-reporting model no longer completely describes the distribution realities for the book publishing industry. It is now a multimedia, multichannel industry in its own right. We are truly a media business.

BISG “Trends” has an opportunity to adapt its reporting to the need for metrics and trends data that reflect this new reality. If we really want to measure the health and promise of the industry, I would like to see “Trends” provide comparisons each year of both totals and changes in the numbers of bookstores, libraries, schools, colleges, discount stores, airport newsstands, etc., all of which measure the potential reach for the industry.

I would like to see sales reporting for independent distributors (such as Independent Publishers Group, National Book Network, Perseus, etc.) who carry considerable economic weight, in addition to the wholesaler/jobber category. And, of course, title and revenue growth in audio, CD, video, e-book and electronic publishing. And, metrics that would describe the new supply chain of digital asset distribution.

Our industry is changing rapidly, and some industry experts believe it may be unrecognizable in 10 to 15 years. The reporting systems that the industry relies on today need to be unbound, reshaped and allowed to report freely on the diversity of activity that is emerging in the publishing industry, and that will describe it in the future. BB

Eugene G. Schwartz is a regular contributor to Book Business. He is a publishing industry analyst, writer and editor-at-large for Foreword Magazine. A former PMA board member, he is president of Consortium House, a management and business consultancy to publishers. He previously was a manufacturing, production and operations executive.